Accounting, Auditing and Stewardship Summary

Accounting in Context

Shareholders

  • Appoint board of directors at the Annual General Meeting (AGM).
  • Vote on key issues, providing direction to the directors on company management.
  • Can request an Extraordinary General Meeting (EGM) for issues they disapprove of.

Directors

  • Act as stewards of shareholders' investments, managing the company day-to-day.
  • Provide an annual report to shareholders on company performance, plans, and strategies.
  • Prepare and publish annual documents: statement of profit or loss, statement of financial position, statement of cash flows, directors' report, and audit report.

Directors' Report and Strategic Report

  • Directors must prepare a report each financial year.
  • Large or medium-sized companies must also prepare a strategic report.
  • The directors' report includes names of directors, proposed dividends, political donations, employment of disabled people, greenhouse gas emissions, audit information, post year-end events, future developments, and employee involvement.
  • The strategic report includes a fair review of the business, principal risks, key performance indicators, and additional explanations of annual account amounts.

Auditors

Internal Auditors
  • Employees of the company, appointed by the directors.
  • Evaluate control systems, information security, risk, and anti-fraud measures.
  • Help ensure the company meets its strategic and ethical objectives.
External Auditors
  • Independent accountants appointed by shareholders.
  • Examine financial statements prepared by directors to ensure a true and fair view.
  • Prepare an audit report presented to shareholders at the AGM.

Audit Report Structure

  • Begins with a statement of auditing the financial statements.
  • Sets out management's and auditors' responsibilities.
  • Includes whether proper books of account have been kept and if financial statements agree with them.

Qualified and Unqualified Audit Reports

Unqualified Report
  • Issued if the company's financial statements are fairly presented, comply with accounting principles and legislation, and all changes have been accurately made and disclosed.
Qualified Report
  • Issued if auditors find doubts or inaccuracies, drawing attention to specific issues.
  • May indicate directors have refused or are unable to make necessary changes.
  • In extreme cases, auditors may disclaim an opinion due to a lack of verifiable information.

Financial Statements

  • The overall objective is to provide a true and fair view of the company's profit or loss for the year and its financial position at year-end.